The gas price is on the rise for the second day in a row. The cause is Russia's requirement to accept payments in rubles only. That had been in the air for weeks, but now the Kremlin is sticking to its word and the delivery to Poland has stopped. The transport of gas to Bulgaria will also be stopped today (April 27).
The downward trend in gas quotations on the TTF came to an abrupt end yesterday (Tuesday, April 26). From €92,84 per MWh - the lowest price since the Russian invasion of Ukraine - the gas price jumped 11% yesterday to €103,21 per MWh. The increase does not seem to have come to an end, but it is slowing down. While writing this article (Wednesday morning), the TTF is above €106,75 per MWh.
Almost all analysts agree on the cause. That is the decision of the Russian state gas company Gazprom to stop deliveries to Poland and Bulgaria today (April 27). The Kremlin has been demanding for several weeks that 'unfriendly countries' pay for gas in rubles and no longer in euros or dollars. The EU member states refuse to comply with this Russian demand and several countries rely on the contracts, which stipulate that payments will be made in euros or dollars. The value of the ruble has plummeted since the war in Ukraine and the Russian economy is squeaking and creaking due to Western sanctions. The Kremlin wants to boost the value of the currency by demanding payment in rubles. European gas buyers must then buy the Russian currency on the foreign exchange market.
Doubt about effect
Poland is 50% dependent on Russian gas and Bulgaria almost completely. By cutting off the gas supply, Russia is increasing the pressure on Europe and is trying to sow discord in the union. Experts doubt the effect of the measure. Firstly, the contracts for gas supplies have been concluded by at least two parties. Unilaterally changing the conditions - as Russia is doing now - is not sustainable, according to legal experts. Moreover, banks and financial institutions that make the payments are extremely careful not to violate sanctions against Russia. Even if some EU member states want to pay in rubles, some experts say it is questionable whether Western banks will want to do this at all.
Ursula von der Leyen, the president of the European Commission, calls Gazprom's decision to stop deliveries to Poland and Bulgaria an attempt at blackmail. "This is unjustified and unacceptable. And it once again shows Russia's unreliability as a gas supplier," said Von der Leyen.
Yet European unity is showing the first hairline cracks. Some buyers of Russian gas, such as Hungary and the German energy company Uniper, still see opportunities to meet Russian demands without violating the sanctions. According to some experts, this is bluff poker at a high level. The EU is largely dependent on Russian gas, but conversely the Russian budget relies heavily on income from the export of that gas to Europe. This means that both blocks keep each other in a headlock.